Restructuring will set stage for new golden age of China's auto industry

South China Morning Post, January 21, 2015

The old automotive industry model - a way to provide mobility for middle-class consumers - no longer 

fits the Chinese context, creating opportunities for innovation.

After a decade of breathtaking growth, China surpassed the United States as the world's largest automotive market in 2009. Since then, in spite of a recovery in US sales, China has widened the gap, with sales of 23.5 million vehicles compared with 17 million in the US. 

However, the 7 per cent growth of last year was about half that achieved in 2013. In fact, China has witnessed single-digit growth in three of the past four years, prompting many market followers to label this the "new normal". Some say the best times for China's automotive industry are now in the past. 

Indeed, there are many reasons to worry. In addition to the overall slowdown of China's economy, a growing number of cities are implementing curbs on car sales, seeking to address concerns about congestion and emissions. Last month, Shenzhen joined a growing list of cities, including Beijing, Tianjin , Shanghai, Guangzhou, Hangzhou and Guiyang , in an effort to cut the growth of the car population by limiting purchases. 

Meanwhile, the rising inventory of unsold vehicles has prompted the China Automobile Dealers Association to openly challenge global brand-name manufacturers, including BMW and Toyota, to increase incentives to their dealers and lower sales targets for 2015. While there is certainly cause for concern in the near term, we believe China's auto market is moving into a new phase, one that still offers the most profitable growth opportunities in the world for both local and global carmakers. Indeed, China's auto industry is on the cusp of major change that will fundamentally reshape things, bringing both opportunities and challenges. 

The age of inefficient, asset-driven growth is over. Overall, there is a capacity bubble after some manufacturers over-estimated growth prospects.  The problem is worst at the middle and lower end of the market. An already hyper-competitive environment will become more cutthroat as manufacturers try to undercut competitors' prices to sell excess stock.

Restructuring China's auto industry is essential to ensure its stable and healthy development. Government policies were implemented over 30 years ago to allow China to acquire the capabilities and capital from foreign sources to build up its domestic industry. While this has helped spur overall growth, it has not yielded a strong base of domestic carmakers. Consolidation and the elimination of weaker brands is inevitable. 

China's automotive industry will continue to expand, but at a more sustainable rate, with a steady stream of first-time purchasers from lower-tier cities joining the repeat buyers and those upgrading in the more established regions.  

A more "binary" market will emerge, with consumers in upper-tier cities continuing to prefer global brands, while those in lower-tier cities will seek no-frills products.  

However, pockets of "new wealth" will emerge in lower-tier cities, too, and these people will begin to mimic the buying patterns of more affluent customers.  

This presents unique opportunities for both foreign and domestic manufacturers. For example, Ford and Great Wall anticipated the shift towards small SUVs and have been enjoying above-average growth. Likewise, European luxury carmakers, such as Audi, BMW, Mercedes-Benz and Land Rover, have seen sales rise exponentially in recent years as a result of the growth in the number of high-net-worth consumers. 

In future, new segments, such as crossover and multi-purpose vehicles, may emerge but they may not be as large or as profitable as the SUV/luxury sectors. Thus, we believe a new golden age is on the horizon for China's auto industry. China remains the largest and fastest-growing automotive market in the world. After years of advances in mobile connectivity, big data and social networks, "internet of vehicles" technology is now shaping the industry as "connected mobility" drives advances in navigation, analytics, driver safety and driver assistance. 

The old automotive industry model - a way to provide mobility for middle-class consumers - no longer fits the Chinese context, creating opportunities for innovation.  

A new solution to personal urban mobility is likely to emerge in China, given the scale of its urban transport challenges and increasing concerns over the environmental impact of conventional vehicles. Indeed, the traditional car-ownership model is being reshaped by urbanisation, the rising aspirations of young consumers, and the development of communications technology and "big data".  

A number of new concepts are emerging, bringing non-traditional players, many of whom are Chinese, into the ecosystem. Examples include taxi-hailing apps such as Alibaba's Kuaidi Dache and Tencent's Didi Dache, which each process over 5 million transactions a day. 

As the leading automotive market, China is poised to revolutionise the global car industry, ushering in the next age of smart vehicles and connected mobility.  

Edward Tse is founder and CEO, and Bill Russo is managing director, at Gao Feng Advisory Company, a global strategy and management consulting firm with roots in Greater China

Click here to read this article at SCMP.com 

China’s antitrust fines for foreign car companies fail to stall growth

The Financial Times, November 3, 2014

Trading up: premium vehicles cost almost twice as much as in the US

For multinational car companies operating in China, the euphoria from the biggest ever automotive boom in industrial history is finally being tempered by some unexpected risks, most notably a controversial investigation by the National Development and Reform Commission (NDRC) into allegedly anti-competitive behaviour by Audi, Mercedes-Benz and other brands.The investigations have so far resulted in fines that are peanuts in comparison to the vast profits that foreign automakers have enjoyed over recent years – and continue to enjoy.

In July, a joint venture between Volkswagen unit Audi and state-owned First Auto Works was ordered to pay $41m for alleged violations of China’s 2008 Anti-Monopoly Law. This compares with reported operating profits of $12.2bn for VW’s joint ventures in China (its other is with SAIC Motor) last year.

Fiat unit Chrysler was also hit with a small fine this summer, while Daimler’s joint venture with BAIC Motor, which makes Mercedes-Benz saloons, is still awaiting the outcome of an NDRC investigation after one of its Shanghai sales offices was raided in July.

These fines are the byproduct of a wide-ranging investigation that appears to have a much larger aim – forcing car companies, regardless of whether they are in fact guilty of anti-competitive practices, to lower the prices of their vehicles, spare parts and services.

According to one industry executive, the head of a multinational company’s China operations has told visiting board members that, in view of the NDRC’s offensive, his biggest fear is of a sudden shift in government policy. “It’s bad for business,” the executive says of the investigation. “It has made the investment environment very uncertain.

“If people can afford the cars, they can afford the spare parts and after-sales service,” he adds. “It’s not like the NDRC is lowering the price of medical care or making food cheaper.”

Foreign automobile executives argue that the relatively high prices asked for cars – especially premium vehicles that can be almost twice as expensive in China as they are in the US – is a function of unprecedented demand, even for overseas models subject to expensive import taxes.

China’s car craze began in earnest in 2008-09, during the depths of the global financial crisis, when it overtook the US as the world’s largest car market. 

Demand from entire generations of first-time drivers soared in the world’s second-largest economy, just as purchasing power collapsed in the US and Europe – a nadir symbolically marked by Washington’s bailout of General Motors in December 2008. 

Over the ensuing half decade, foreign carmakers in China, especially long established ones such as Volkswagen and GM, had a license to print money. 

Even last year, when double-digit annual growth was finally expected to taper, annual sales grew by about 15 per cent to 18m passenger cars – 10 times as many as were sold in India.

This year began in similar fashion, especially for foreign brands and their Chinese joint venture companies. Sales of Chinese brands, however, began to fall sharply and their share of the passenger car market tumbled from 27 per cent to 23 per cent.

The precipitous fall-off in sales of local brands and slower economic growth has forced the China Association of Automobile Manufacturers to lower its projection of an 8.3 per cent increase in year-on-year sales this year to 4.6 per cent – two-thirds down on last year.

In the first quarter, Geely, the private sector carmaker most famous for its purchase of Volvo Cars from Ford, saw sales of its own-brand vehicles fall by as much as 40 per cent over the same period a year earlier. 

This was despite a gradual improvement in the quality of local-brand cars in China, according to Geoff Broderick at JD Power, which publishes an annual customer survey of 212 models across 62 brands. “The domestic brands are doing exactly what they should be doing – focusing on quality,” Mr Broderick says. “But as we see the quality gap closing, we’re not seeing a pick-up in [local brands’] market share.”

Investigations have so far resulted in fines that are peanuts in comparison to the vast profits that foreign automakers continue to enjoy

One reason for the fall has been a counterintuitive NDRC requirement that foreign-invested joint ventures develop a local brand for the China market, such as the Baojun saloon manufactured by GM, SAIC and Wuling. Many of these new entrants are priced to compete against domestic rivals, especially in smaller cities where car ownership rates are relatively low.

“I don’t understand what the Chinese government’s objective was in encouraging foreign companies to create local brands,” says Bill Russo, a Shanghai-based industry consultant. 

“It only cannibalises already distressed sales of local brands. I think the intent was for more technology to be shared by the foreign companies. But the unintended consequence is to take volume from local carmakers producing similar products,” he adds.

At the other end of the spectrum, foreign carmakers continue to thrive in saturated markets such as Beijing and Shanghai, where premium brands such as Audi, BMW and Mercedes-Benz account for a quarter of the market. 

Even now, limits on expensive new licence plates to combat congestion and pollution are spurring their sales, as existing plate holders trade up.

“As cities implement plate restrictions, people gravitate towards premium foreign brands,” says Mr Russo. “They want to put their expensive plates on the best piece of automotive technology that they can.” 

Click here to read the article at FT.com

Jaguar Land Rover’s first China factory caps carmaker’s resurgence

The Financial Times, October 21, 2014

The opening of Jaguar Land Rover’s first China factory caps a five-year resurgence under Indian ownership that has made the Coventry-based company a byword for British manufacturing excellence and export prowess.

The new plant in Changshu, about a two-hour drive from Shanghai, marks a pivotal moment for JLR. The Tata Motors unit needs a manufacturing presence in China to consolidate its position in the world’s largest car market – but also wants to assure its British workforce and the UK government that international expansion will not jeopardise jobs at home.

As part of that effort, JLR is boosting investment at its factories in Liverpool and the West Midlands and this month opens a new £500m engine plant in Wolverhampton – even as it plans to open another manufacturing facility in Brazil. Last week, JLR’s factory in Halewood, Merseyside began producing the new Land Rover Discovery Sport after a £200m investment that created 250 new manufacturing jobs and £3.5bn in supplier contracts.

The Changshu factory, a Rmb10.8bn ($1.8bn) joint venture with state-owned Chery Automobile that opened on Tuesday, will produce JLR’s less expensive Range Rover Evoque for the China market, where the company sells almost five SUVs for every one Jaguar saloon. On Tuesday, JLR said that it also intended to produce a Jaguar saloon model at the factory by 2016.

“The demand that’s here in China will far outstrip [Changshu’s] capacity so we have absolutely zero plans to export any cars whatsoever,” Bob Grace, JLR’s China head, said at this year’s Beijing Auto Show.

Mr Grace hosted UK trade unionists in China at the outset of JLR’s investment programme in an effort to allay their fears. “You can imagine the thoughts that go through their mind when you open a factory in China,” he said.

“When you look at the competitive situation it doesn’t take long to realise that you have to build the cars in China as part of our global aspirations to be a fairly significant player.”
Roger Maddison, at UK union Unite, was one of JLR’s guests and says the union accepts the logic of the Changshu investment but has concerns about the longer-term trend it signals.

“Tata knows what differentiates JLR from other carmakers – it’s British,” says Pierluigi Bellini, analyst at IHS Automotive. “If they start developing cars in, say, India, it’s going to be a different brand image . . . Developing it from scratch – blank white paper to the final design – it’s important to keep that in the home market.”

Tata bought JLR from Ford in March 2008, a week after JPMorgan bought Bear Stearns. When Lehman Brothers went bankrupt six months later, the global financial crisis began in earnest and Ratan Tata, then chairman of the Indian group, had plenty of reasons to regret his purchase.

But the Indian provenance of JLR’s new owner hinted at the multinational nature of its future transformation, which would be built on surging demand in developing economies. The most important of these was China, whose emergence as the world’s largest car market coincided with the US government’s December 2008 bailout of General Motors.

“During the early part of 2009 we were pretty close to the wire as a business,” said Mr Grace. “But I used to come to China once a quarter and got a sense that something different was happening in this place . . . It’s almost a miracle that the [China] factory has come out of the ground in such a short period of time.” JLR’s joint venture with Chery was announced less than two years ago.

Bernstein Research predicts JLR will sell 130,000 vehicles in China this year, compared with 54,000 total units in 2009-2011. The Changshu factory’s initial annual production capacity is 130,000 vehicles but output is expected to ramp up gradually over the next few years.

“No other [carmaker] has benefited as much from China,” Max Warburton, senior analyst at Bernstein Research, wrote in a recent report. The country now accounts for a third of JLR’s total sales and, Mr Warburton estimates, more than half of its earnings before interest, tax and depreciation. In its latest quarter JLR posted pre-tax profit of £924m, on revenues of £5.35bn.

But the success has been driven by the Land Rover side of the company – in particular the Range Rover Evoque, a sporty 4x4. JLR sold more than 90,000 cars in China last year, but only 16,000 of these were Jaguars. The big three German brands – Audi, BMW and Mercedes-Benz – sold more than 1m. 

JLR joins the “big three” Germans as the fourth big premium carmaker to begin manufacturing operations in the world’s largest car market. Annual sales of premium vehicles, currently about 1.3m, are expected to reach 2.5m-3m units by 2020. But the Germans dominate the sector, with a combined market share of about 80 per cent. 

“There’s lots of opportunity for new premium entrants,” says Bill Russo, a Shanghai-based industry consultant. “The market is underserved. The German three alone can’t continue to maintain that kind of dominant market share. They can’t keep up with demand.”

JLR estimates that local manufacturing has allowed its German rivals to reduce prices by about 15 per cent on average, thanks to savings on import tariffs and other costs. The UK company, by contrast, has what Mr Warburton calls “the most egregious pricing in China”.

In response, Mr Grace says JLR has “worked quite closely with [Chinese regulators] in terms of reacting to the challenges they gave us [on pricing]. We more than met their requirements”. He adds: “We’re not setting the market price – we’re following the market price.”

JLR reduced prices on some Range Rover and Range Rover Sport models earlier this year in China, in response to a concerted campaign by the National Development and Reform Commission to drive down the pricing of vehicles and spare parts.

But the price differential between the same Land Rover models sold in China and other markets remains wide, with a top-end Range Rover selling for the equivalent of £85,400 in China and £44,000 in the US.

Click here to read the original article at FT.com 

奔驰和比亚迪用四年造了款车 你会买吗？(Mercedes-Benz and BYD Took 4 Years to Create the Denza EV: Would You Buy It?)

Jiemian.com, September 26, 2014

http://www.jiemian.com/article/199506.html

戴姆勒和比亚迪合作的第一款车终于推向市场，但似乎腾势对中国汽车新能源市场并没有足够的信心。

9月26日，腾势首款纯电动汽车率先在上海上市。这距离比亚迪和戴姆勒成立合资公司已经过去了四年。用四年时间来研发生产一款车在中国人眼里看来似乎太长。深圳比亚迪戴姆勒新技术有限公司COO罗格林（Arno Roehringer）告诉界面记者，如果时间允许，他希望用更长的时间来完成这个项目，因为这是一个全新的项目。

腾势的电池容量为47.5千万时，官方续航里程为300公里。为了加强电池组的安全性能，腾势的电池组外包裹着一个电池防护装置，它降低了汽车在发生碰撞时的自燃几率。比亚迪的E6电动车2012年曾在碰撞之后发生大火。

前克莱斯勒东北亚负责人、高风咨询公司董事总经理Bill Russo称，这款车更容易被一些“早期先驱者”购买。

腾势汽车在比亚迪的大本营深圳生产。双方合作中，戴姆勒提供整车制造工艺以及结构安全的品控，比亚迪负责电池、电机、电控和大规模路试。双方将其归结为“技术与品牌”的合作。

腾势为消费者最担心的充电设施做足了准备。腾势与全球电力和自动化技术企业ABB合作，为购车者提供充电解决方案。界面记者获悉，腾势内部还成立了一个专门针对恒大、万科和SOHO这类地产商的游说部门，该部门的主要职责是进行充电设备安装的合作推广。

腾势的首批经销店分别在上海、北京和深圳三个城市，分别由利星行、庞大集团和中升集团代理，他们同时也是奔驰品牌的经销商。

腾势相关负责人称，选择这些城市是因为这些城市出台了地方新能源补贴政策，也是国家节能与新能源示范推广试点城市。南京、杭州等地的经销店则计划在2015年一季度开业。

腾势两款车型售价分别为人民币36.9万和39.9万元。上海、北京和深圳的消费者在享受国家和地方新能源推广补贴后的购买起步车型的价格都不超过30万元，还能享受减免车辆购置税等优惠。

庞大集团董事长庞庆华称，“原计划在9月中旬开业的北京经销店现稍有延迟，目前接到了30多个订单。”未来腾势经销店还提供免费接送的充电服务。

双方的准备似乎非常充分，但戴姆勒对腾势未来的销量持谨慎态度。腾势汽车一份内部规划显示，今年9月产量为115辆，半年后月产量也只有213辆。而腾势工厂的规划产能是4万辆。

原计划去年11月亮相的腾势一直拖延到今年的北京车展，上市之前也没有大的品牌宣传活动，这和比亚迪汽车一贯的处事风格大相径庭。罗格林告诉界面记者，从戴姆勒的角度来讲，他们更注重产品的质量和提供的服务，对于宣传不是特别在意，所以最终按照戴方的意思执行。

Bill Russo认为，中国的电动车市场目前主要受补贴驱动。大规模的营销活动在初期并不是必须的，更重要的是让消费者接受产品本身，让政策制定者通过税收和补贴政策吸引消费者。

“相对于奔驰品牌，腾势是一个全新的品牌和产品，很多事情还在摸索中，”上海利星行腾势经销店的负责人郑雄伟称，虽然有很多热心客户询问，但后续效果如何他们也不得而知。

在中国，德系三大豪华汽车品牌选择了不同的新能源汽车发展道路，这些道路看起来都趋向于保守。稍早上市的华晨宝马之诺电动车选择了“只租不售”模式，奥迪还未在中国市场推出电动车型。今年8月份，德国总理默克尔访华期间曾为德国汽车制造商推广新能源汽车，呼吁统一中德充电标准。

“发展新能源汽车需要时间，需要建立政府部门、汽车公司和基础设施提供者合作的良性生态圈才能让消费者接受。”Bill Russo告诉界面记者，只有消费者认可了，看到这些利益机会时，汽车制造商才更有信心。

Pechino contro l’auto straniera L’accusa antitrust: listini gonfiati

Corriere della Sera, August 23, 2014

Bill Russo offers his views on China's Anti-Monopoly Campaign.

Mercedes Overhaul (检修奔驰)

CBN Weekly, August 18, 2014

Cover Story from CBN Weekly on the reconstruction of the Mercedes-Benz business in China.  Includes extensive commentary from Bill Russo.  Article is in Chinese.

Click here to read the article at CBNweek.com

China’s Latest Price Fixing Target

Reuters Newswires, August 18, 2014

Click here to see the video at AOL.com

China finds Mercedes-Benz guilty of price fixing

Reuters Newswires, August 18, 2014

Germany's Mercedes-Benz has been found guilty of manipulating prices for after-sales services in China, the official Xinhua news agency reported, adding to pressure on foreign carmakers in the world's largest auto market.

The report by the official Xinhua news agency made no mention of possible penalties, but China's 2008 anti-monopoly law allows the country's anti-trust regulator to impose fines of up to 10 percent of a company's China revenues for the previous year.

The Jiangsu Province Price Bureau, which launched an investigation last month, found evidence of anti-competitive practices after raiding Mercedes-Benz dealerships in the eastern coastal province and an office in neighboring Shanghai, Xinhua said.

The dealership in the same building as the Shanghai office which was raided appeared to be operating as normal on Monday (August 18), with potential customers peering at shiny new cars.

A Daimler spokesman repeated a statement, first made by Mercedes-Benz on August 5, that it was assisting the authorities with their investigation, adding that it was unable to comment further as it was still an on-going matter.

The Xinhua report said the cost of replacing all the spare parts in a Mercedes-Benz C-Class could be 12 times more than buying a new vehicle, citing a report from the China Automotive Maintenance and Repair Trade Association.

Managing director of Gao Feng advisory firm, Bill Russo, said the consumer would benefit.

"So I think what we are seeing is, first of all, a communication to the market that over the years, foreign branded products have been priced very high and informing the Chinese consumer that perhaps they should take another look at the prices and look for a more competitive price from the…and demand a more competitive price from the manufacturer. So in the end, this is actually a good thing for the consumer," he said.

An array of industries, from milk powder makers to electronics firms, have been coming under the spotlight in recent years as China intensifies its efforts to bring companies into compliance with the 2008 legislation.

The auto industry has been under particular scrutiny, with a wave of investigations prompting carmakers such as Mercedes-Benz, owned by Daimler, Volkswagen AG's Audi, and BMW to slash prices on spare parts in recent weeks.

"So by enforcing these laws, they are actually making the foreign branded products more affordable to the market, which in the end is going to make harder for Chinese branded car makers to compete against them. So the unintended consequence is that you're giving the consumers a better price but you are also forcing the local car makers to compete with foreign branded products that are more affordable," Russo added.

Early this month authorities said they would punish Audi and Fiat SpA's Chrysler for monopoly practices.

Chinese media reported last week that Audi, the best selling foreign premium car brand in China, would be fined around 250 million yuan ($40.7 million).

Click here to read the original article

Global carmakers seek China inroads

The Financial Times, April 18, 2014

There will be no Easter holiday for many senior US and European auto executives as they abandon their families and battle jet lag at the largest car show in the world’s largest car market.

The Beijing International Automotive Exhibition, or Auto China 2014, opens on Sunday at a time when the importance of the fast-growing China market to the fortunes of multinational car companies has never been clearer.

In the first quarter of this year passenger vehicle sales in China rose 10.1 per cent to 4.9m units, including a monthly record of 1.85m units in January – a figure that exceeded the 1.8m passenger vehicles sold all of last year in India, Asia’s third-largest economy.

From mass market automakers such as GM to luxury manufacturers Daimler and Ford unit Lincoln, global success depends on success in China.

“Two, three years ago Beijing was an emerging show. Beijing is now on everyone’s calendar,” says Robert Parker, president of Lincoln China. “I told my wife I’d miss her birthday and my children that I’d miss their Easter egg hunt, but all of [Ford’s] executive and leadership team has done that.”

One executive who will not be in Beijing is Mary Barra, GM’s under fire chief executive. But far from the recall scandal that has erupted in GM’s home market, the US automaker expects to sell its one millionth vehicle in China this year during the show.

That puts GM on track to comfortably exceed the 3.2m passenger vehicles its joint ventures sold last year in China, GM’s biggest market accounting for about one-third of total sales. Analysts at Morgan Stanley estimate that joint-venture dividends and royalties from China contribute almost 60 per cent of GM’s free cash flow.

Lincoln will formally enter China’s luxury market, currently dominated by Audi, BMW and Mercedes-Benz, later this year. It is also unveiling a new car at the Beijing show – something it has never done before outside the US.

Bill Russo, founder of automotive consultancy Synergistics, predicts that popular “crossover” models – part sedan, part SUV – and technology features will garner much of the attention at Auto China 2014. “You can’t just come into the market with a car,” he says. “You have to show that you’re different from everyone else because the passenger car segment in China has become very crowded and hyper competitive.”

The competitive pressures are being felt most acutely by China’s largest domestic auto manufacturers, which some analysts feel are on the verge of a crisis.

At the end of last year, Chinese-brand passenger sedans commanded 27.5 per cent of the market, according to the China Association of Automobile Manufacturers, with German sedans in second with 24.3 per cent. Just three months later, German sedans lead with 27.1 per cent compared to 23.7 per cent for their Chinese rivals.

The collapse has triggered an intense debate among Chinese car companies and policy makers about whether shock therapy – in the form of a relaxation of the industry’s 50 per cent foreign ownership limit – is required.

Critics say the policy has encouraged passivity among large state-owned car companies, which enjoy a steady flow of profits from their joint ventures with foreign manufacturers while failing to develop own-brand vehicles that can compete domestically, let alone in Europe and the US.

China’s largest carmaker, SAIC Motor, sold just 230,000 of its own-brand cars last year, compared to the more than 4.7m units sold by its joint ventures with GM and Volkswagen. Sales for China’s “domestic big 5”, which in addition to well-regarded private-sector creations Great Wall Motor and Geely include BYD, Changan and Chery Automobile, are down 10 per cent this year.

“The dramatic decline in domestic [brand] sales so far this year has exceeded even our bearish expectations,” Bernstein Research analyst Max Warburton wrote in a recent note. Bernstein had projected the market share of Chinese brand cars would decline by 2.5 percentage points over the next two years but instead, their share fell 2.6 per cent percentage points in the first quarter of this year alone.

Click here to read this article at FT.com

Bill Russo joins Harman as Northeast Asia & China Operations VP

China Automotive Review, January 6, 2014

by Ava You

BEIJING – Bill Russo, former president and CEO of Synergistics Ltd. in Hong Kong and vice president of Chrysler Northeast Asia, joined Harman International Industries, the premium global audio and infotainment group, as the company’s vice president of corporate development for Harman’s North East Asia & China operations, responsible for new business development, regional growth initiatives, strategy deployment and related communications, according to a company news release.

Russo reports to David Jin, chairman and president of Harman North East Asia & China. He also reports to Sandra Rowland, vice president of corporate development and investor relations for Harman International. Russo will be based at Harman’s North East Asia headquarters in Shanghai, China.

Russo had served as president and CEO of Synergistics Ltd., an Asia-based business development advisory firm, since March 2009. He served as vice president of Chrysler Group’s North East Asia business, where he directed operations for the regional markets from July 2004 to September 2008. He was director of product & business strategy at DaimlerChrysler from January 2000 to July 2004, senior manager of post-merger integration of DaimlerChrysler from May 1998 to December 1999, and senior manager of process management & continuous improvement at Chrysler Corp. from July 1993 to May 1998. Earlier in his career, he worked in the global services and technology divisions for IBM Corp. from July 1982 to June 1993.

Click here to read this article at China Automotive Review

In China, hybrids can't seem to sell without a lustrous nameplate

Nikkei Asian Review, December 19, 2013

A Lexus ES300h on display at a dealership in Shanghai.(Mark Andrews)

SHANGHAI -- Hybrid cars haven't been a big hit in China.
   
Shanghai rolled out 350 Buick LaCrosse Hybrids for use as taxis for the green-themed World Expo in 2010, but the cars disappeared soon after the exhibition ended.

Toyota infamously sold only one of its world-leading Prius models in China during the same year.

Sales of the utilitarian Prius have rebounded slightly but are still slow. Imported Honda gasoline-electric cars, meanwhile, have been faring worse.

Hybrids, however, are making inroads at the premium end of China's car market.

Toyota's luxury Lexus division is on track to sell close to 20,000 hybrids in China in 2013. Last year, it unloaded 16,000 of the things, leaving Prius sales way behind at 2,434.

Lexus last month pointedly unveiled the revamped CT200h model at the Guangzhou Auto Show rather than at shows going on at the same time in Tokyo and Los Angeles. Mercedes is also finding a welcome for its hybrid S-class sedans, though it isn't giving out figures.

"It is easy to sell these cars," a sales manager at a Shanghai Lexus dealership said, gesturing at the CT200h hybrid and other models. "We firstly emphasize the six-year warranty and secondly that it saves fuel."

Indeed, fuel economy has not been a strong selling point in China, where most car buyers are first-time purchasers.

Said Boni Sa, an automotive analyst at consultancy IHS Automotive: "For these first-time buyers, they have more to consider, like brand, vehicle size, features or safety. In an emerging market like China, to spend money on a better brand or larger model is much more reasonable than spending money on better fuel consumption."

Price is a key factor even for repeat buyers. In Chengdu, where the Prius is produced, businessman Jimi He recently bought his third car, a Volkswagen Tiguan crossover.

"I'd love a hybrid," He said. "It is more environment-friendly and more energy-saving. However, the price is the key issue that stops me from getting one."

The argument that buyers will recoup the higher upfront cost of a hybrid through fuel savings is not so convincing in China. To recover the 12,000 yuan ($1,976) price premium on the hybrid version of SAIC Motor's locally developed Roewe 750 sedan, for example, would require driving the car at least 100,000 kilometers.

Some automakers had campaigned for Beijing to begin subsidizing gas-electric hybrid purchases this year. They argued this could be more effective in addressing pollution concerns than the government's generous subsidies for pure electric cars and plug-in hybrids, which have not generated significant sales. Instead, China in September renewed the existing subsidies.

So the carmakers are finding other ways to close the price gap. Toyota announced at the Guangzhou show that it will localize production of batteries and hybrid motors for the Prius and Camry Hybrid. These components are now imported and slapped with high duties. As it stands, for the price of a Prius, a Chinese buyer can get a much larger family car.

This is why hybrids are attracting buyers for whom price is less of an issue.

"Some customers are buying a Lexus SUV or a Mercedes-Benz S-class rather than hybrid vehicles," Sa said. "Hybrids' inflated costs can be ignored by these customers."
   
At the premium end, hybrids can be positioned as high-tech and top-of-the-range rather than fuel-saving and environmentally friendly.
   
A new Mercedes E400 hybrid is to offer a more powerful engine with better acceleration than that of the standard model.
   
"Premium carmakers have a higher chance of success in the area of hybrid vehicles, mainly because premium autos are not purchased by price-sensitive consumers" said Bill Russo, president and chief executive of automotive consultancy Synergistics in Beijing. "It is still a small market but will grow as more automakers slowly introduce more models."
   
The long wheel-base E-class Mercedes will be the first premium hybrid to be produced in China. Infiniti is set to begin producing cars in China 2014, and Lexus is a possibility.

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豪华车品牌开辟巴西战场 寻找新增长点_网易财经

China Business News, November 28, 2013

在巴西，汽车销售份额占首位的是意大利品牌菲亚特，为22.8%，其次是德国大众和美国通用，分别占21%和19.8%。

不过这个局面或即将被豪华车品牌打破。捷豹路虎、宝马、奥迪等豪华品牌正在布局巴西市场，试图在新兴市场中寻找新的增长点。

据路透社报道，巴西地方政府透露，捷豹路虎将斥资10亿巴西雷亚尔（约合4.37亿美元）在里约热内卢州建造一座新工厂，捷豹路虎新工厂选址位于伊塔蒂亚亚，预计最早将于2015年投入运营，该公司将于12月3日就这一计划发布官方声明。

在巴西投资设厂将成为捷豹路虎在海外市场中第二个生产基地，第一个海外生产基地则通过和奇瑞汽车合资的形式，设立在中国。

巴西汽车经销商协会Fenabrave提供的数据显示，今年前10个月中，路虎在巴西市场累计销售了8920辆汽车，宝马与奔驰在这一市场的同期销量则分别达到了1.15万辆与1.05万辆。

捷豹路虎在巴西市场设厂不是一家豪华车品牌的个案。近两年来，多家豪华车企已经敲定或考虑在巴西投产，或将产品引入巴西市场。

去年10月份，宝马宣布投资2.0亿欧元（约合2.61亿美元）在巴西建立一座整车厂，以加快在巴西市场的销售增长速率，新工厂将位于圣卡塔琳娜州，2014年投产，设计年产能3万辆。

奥迪紧随其后。今年9月份，大众汽车宣布一项投资计划，计划在巴西投资12亿雷亚尔（约合5.29亿美元），开始在当地组装最新款高尔夫车型并重启奥迪豪华车在巴西的生产。大众汽车发言人表示，奥迪预计从2015年开始在巴西启动生产，并在3年内使A3紧凑车的年产量达到2.6万辆，还将在巴西Ingolstadt工厂生产Q3紧凑型SUV。

梅赛德斯-奔驰也对外宣布了对巴西市场投资的计划。对于豪华品牌车企纷纷对巴西市场投资的现象，克莱斯勒东北亚前副总裁、香港协同共进有限公司总裁罗威对《第一财经日报》记者表示：“最根本的原因是巴西有可能是未来10多年中增速最快的市场之一。为了不在未来的竞争中落后，豪华品牌车企投资巴西是很正常的一个策略。”

公开的数据显示，巴西已经超过德国成为世界第四大汽车市场。在过去的十年中，国内登记的轿车数量增加了将近一倍。“巴西乘用车市场近年来稳步增长，过去5年年均增长率达到7%，其中中高级轿车的增长速度更快，因此越来越多汽车厂商考虑增加在巴西的投入。”普华永道中国管理咨询业务合伙人金军对本报记者表示。

根据盖世汽车网统计，今年前三季度，巴西轻型车的新车累计销量为263.84万辆，去年同期则为266.68万辆，今年同比下跌1.1%；整体车市累计销量278.03万辆，去年同期为278.90万辆，今年同比下跌0.3%。

“巴西的政局、经济发展稳定，是仅次于中国汽车市场体量的新兴市场。这几年，巴西市场每年的新车销量大概在360万~400万辆之间徘徊，销量比较稳定。”江淮汽车高层对本报记者表示。江淮汽车今年已经宣布通过和巴西当地企业合资的形式在巴西设厂。

罗威表示，巴西进口税也使得车企在巴西投资以及本地化有了更大吸引力。2011年年底，巴西政府出台新税政：进口汽车或没有按巴西政府要求完成国产化率指标的汽车生产企业，将被提高30%的税率，同时对在巴西增加投资的汽车商提供税收减免政策。

不过，本田汽车和通用汽车公司已表示巴西豪华车销量仍然不令人乐观，因此他们不会考虑使巴西成为生产高端市场车型的基地。

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Daimler unveils €2bn China expansion

The Financial Times, August 27, 2013

Daimler has announced plans to export critical engine components from China for use in its German-made vehicles as part of a fresh €2bn expansion effort intended to kick-start its business in the world’s largest car market.

Hubertus Troska, a Daimler board member and Beijing-based chairman of the company’s Greater China unit, said on Tuesday: “There is a recognition [at Daimler] that we need to improve our position in China vis a vis some of our competitors.”

The expansion plans, which will double capacity at Daimler’s passenger car joint venture in Beijing, include construction of the luxury carmaker’s “first fully fledged engine factory outside Germany”. Frank Deiss, president of Beijing Benz Automotive, said critical engine components including crankshafts, cylinder heads and engine blocks would be exported back to Germany.

Mr Troska added: “The quality level that we are putting in here will be like no other engine plant that we have outside Germany and is to the same level as our German plants.

“Customers will never know – nor do they need to worry – where the parts come from . . . Beginning next year we’re actually going to ship the parts to Germany. They’re waiting for them.”

Bill Russo, a Beijing-based automotive consultant said: “Powertrain systems are usually the last major component technology to be localised. Daimler arriving at this stage is a huge step and using Chinese-sourced components outside of China is also significant.”

Mr Troska is the first board member posted by Daimler to China, where it has long lagged behind German rivals BMW and Audi. “[Board representation] is a prerequisite in order to make sure the decisions of our company will always take Chinese needs and market characteristics into consideration,” said Mr Troska.

Ivo Naumann, managing director at consultancy AlixPartners, added: “The appointment of a board member to China is a reflection that they understand this is one of the two or three core markets for luxury cars and if you are not successful here it is going to be hard to achieve your global targets.”

Last year only 96,500 of the more than 206,000 Mercedes-Benz cars Daimler sold in China were manufactured by its Beijing joint venture – a local production rate well below those achieved by BMW and Audi. Daimler said it intended to boost sales to 300,000 units a year by 2015, with two-thirds produced in China.

Analysts also point to the success of Daimler’s German rivals in developing a wider range of vehicles specifically tailored to the Chinese market, including longer cars with more room in the back seat for owners who prefer to be chauffeured in comfort through the country’s clogged city streets.

“Daimler has been behind BMW and Audi [in China] for quite a while because their product development cycle has been lagging,” said Benjamin Lo, an auto industry analyst with Nomura in Hong Kong.

Click here to read this article at FT.com